Experts warn of defaults, as some industries will struggle with repayments due to lack of money and some borrowers may be hit by layoffs, etc.
The suspension of fresh Insolvency and Bankruptcy Code proceedings for a year also added to pressure on the banking & financial space, experts say.
The Bank Nifty crashed 45 percent in three months to hit a new low in March. It recovered 27 percent by April-end but in May, it has been under selling pressure and has consistently underperformed the Nifty.
On May 19, it fell nearly 700 points from the day's high and finally settled at 17,486.25, down 86.95 points. It is around 569 points away from March’s closing lows.
The Bank Nifty formed a bearish candle for the fifth consecutive session on May 19 while in the previous session, it made a Bearish Belt Hold pattern.
Given the pessimism, the index is expected to break its March intraday as well as closing lows soon, say experts.
The Nifty retraced nearly 50 percent of the fall but the Bank Nifty couldn't even retrace 38.2 percent of the previous fall. This
shows that the banking space has an inherent weakness and is likely to witness much deeper cut going ahead, he added.
Structurally, the Bank Nifty has resumed the medium term downtrend; is expected to test the March low of 16,116 in the short term, while the medium term target on the downside is as low as 14,500, Ratnaparkhi said.
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